DAS FEIGENBAUM DISCUSSES ENERGY PRIVATIZATION AND

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 001489

SIPDIS

SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: DECL: 10/23/2016
TAGS: PGOV PINR PREL KG
SUBJECT: DAS FEIGENBAUM DISCUSSES ENERGY PRIVATIZATION AND
CONSTITUTIONAL REFORM WITH KYRGYZ PARLIAMENT SPEAKER
SULTANOV

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Classified By: AMBASSADOR MARIE L. YOVANOVITCH, REASONS 1.4 (B) AND (D)


1. (C) SUMMARY: Having just returned from meetings with the
Venice Commission on constitutional reform, Speaker of
Parliament Marat Sultanov was eager to meet with SCA DAS Evan
Feigenbaum to discuss U.S.-Kyrgyz relations, the energy
sector, and draft constitutions. The candid discussions
revealed that, while Parliament may support the privatization
of the energy sector, members have a long list of concerns
and will demand answers and transparency before backing the
move. Sultanov also said that the sheer number of draft
constitutions that have surfaced since the 2005 "revolution"
have bogged down the reform process. Sultanov also said he
was planning a visit to the U.S. in February. END SUMMARY.


2. (C) Admitting that Kyrgyzstan's relationship with the U.S.
was put to the test over the summer, Speaker Sultanov agreed
with DAS Feigenbaum that the two nations must revert back to
the solid relationship experienced before the PNGs and other
difficulties. Feigenbaum conveyed the USG's commitment to
Kyrgyzstan and the country's progress in reforming the energy
sector, improving trade relations, and the upcoming decision
on Kyrgyzstan's Millennium Challenge Account Threshold
Country Plan. Feigenbaum reiterated that Kyrgyzstan is not
an object of struggle between the U.S. and Russia or China.
Rather, U.S. policy focuses on Central Asian nations
themselves as sovereign, independent states.

CAUTIOUS STEPS TOWARD PRIVATIZATION OF ENERGY SECTOR
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3. (C) Feigenbaum noted U.S. power company AES's interest in
Kyrgyzstan and asked about prospects for privatizing the
energy sector. Sultanov expressed Parliament's demand for
transparency throughout any privatization process and listed
a number of concerns that have yet to be addressed by the
Kyrgyz government. Sultanov and Parliament want to know if
tariffs will be affordable for pensioners and the poor,
asserting that "doubling the prices" is not an option. He
stated the government could increase pensions as a way to
compensate the underprivileged, but no such plan has been
proposed.


4. (C) Sultanov also listed certain stipulations for
selecting the right company to invest in Kyrgyzstan's energy
industry. He demanded that his government set minimum
requirements for firms wishing to participate in the bidding
process. This, he felt, would help to avoid fly-by-night
companies with no previous history or experience, little
capital and conspicuous offshore accounts. He stated that
the investment capabilities of the company and plans for
export should also be factors in the selection process. The
Speaker said that Kyrgyzstan should "avoid a situation where
the energy sector falls into the hands of shady businessmen."
With nearly 40 percent of electricity "lost" in the
transmission of power, a bidder's plans for renovations to
the distribution system should also be considered.
Feigenbaum stressed that U.S. investors have already spent
over USD 800,000 on feasibility studies in the region to
address these types of concerns.


5. (C) Speaker Sultanov claimed that the bidding process
should be impartial and transparent, disregarding political,
cultural or regional ties as relevant factors.
Profitability, he stressed, was most important. He expressed
his strong belief that Kyrgyzstan needs a business
environment open to companies like AES. He admitted that it
is too early to discuss privatization because the Kyrgyz
government is not ready and has many questions to answer. He
stated that the President and Prime Minister met with several
international investors on the issue. Sultanov said he had
refused to meet with the same business representatives,
reasoning that the Kyrgyz government is not yet prepared to

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handle the privatization process and therefore, should not
feel the need to meet with investors.

MORE THAN ENOUGH DRAFTS
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6. (C) When asked about the plethora of constitutional
drafts, the Speaker joked that every week someone else wants
to submit their version of the constitution. Sultanov
himself claimed to have over 150 proposals for reforms but
has not submitted an actual draft. Should this continue, he
said, reforms will never be completed. Sultanov stated his
belief that the Parliament's draft from June 2005, supported
by OSCE and UNDP, should be used as the basis for the
constitution. He acknowledged that versions submitted by the
President have formidable chapters on human rights and
judicial reforms that should be used in the final draft.
Sultanov affirmed that the opposition and the President must
make steps toward a legitimate compromise beneficial to the
nation.

TRIP TO THE U.S.
--------------


7. (C) The Speaker mentioned plans for a trip to the U.S. in
February 2007, when Parliament will be on winter recess.
According to his staff, Sultanov has accepted an invitation
from Utah State Senate President John Valentine to visit Salt
Lake City. (Note: Former Kyrgyz Ambassador to the U.S.
Baktybek Abdrisayev currently teaches at Utah Valley State
College and may have played a role in arranging the
invitation. End Note.) Sultanov also plans to travel to
Washington to attend the National Prayer Breakfast. The
Speaker's assistant expressed interest in arranging meetings
in Washington as well. The Speaker plans to be accompanied
by three deputies, his advisor and two additional staff
members.

COMMENT
--------------


8. (C) A levelheaded thinker who seems determined to properly
represent the Kyrgyz people, Sultanov seemed to view
compromise and cooperation as key elements to the development
of a sound government. Sultanov sees the importance of
privatizing the energy sector but does not want to back the
process if the proper regulations, guidelines and
preparations, ensuring improved conditions for the
population, are not in place. Neither anti-Bakiyev nor
pro-opposition, Sultanov has hewed a relatively moderate path
since he became speaker and often plays a mediating role. We
see this trip to the U.S. as an opportunity to introduce the
Speaker to counterparts in the Congress and key individuals
in Washington. END COMMENT.

YOVANOVITCH